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Problem 2
IN
HCJ Corporation is completing their cash budget for the following year. HCJ Corporation is a manufacturer of
w
metal picture frames. The firm's two product lines are designated as S (small frames; 5 x 7 inches) and L (large
Sales figures
frames; 8 x 10 inches). Here is the provided budget information:
20XO
20X1
Q4
Q1
1. Sales in the fourth quarter of 20x0 are expected to be 50,000 S frames and 40,000 L frames. Over the next
6 S frame unit sales
50,000
55,000
year, sales in each product line will grow by 5,000 units each quarter over the previous quarter. For example, S
7 S sales price
S
10
S
10
frame sales in the first quarter of 20x1 are expected to be 55,000 units.
8 L frame unit sales
40.000
45.000
2. HCJ's sales history indicates that 60 percent of all sales are on credit, with the remainder of the sales in cash.
9 L sales price
S
15 S
15
The company's collection experience shows that 80 percent of the credit sales are collected during the quarter in
10
40% Percent of sales made for cash in the quarter of sale
which the sale is made, while the remaining 20 percent is collected in the following quarter. (For simplicity,
11
60% Percent of sales made on credit
assume the company is able to collect 100 percent of its accounts receivable.)
12 Collections
13
80% of current quarter's credit sales
3. The S frame sells for $10, and the L frame sells for $15. These prices are expected to hold constant
14
20% of previous quarter's credit sales
throughout 20x1.
15
4. Total manufacturing cost per unit is $7 for the S frame and $10 for the L frame. All manufacturing cost
16
purchases are made on account, and 80 percent of each quarter's purchases are paid in cash during the same
17 Purchases
20XO
20X1
quarter as the purchase. The other 20 percent is paid in the next quarter. Units sold equal units purchased
18
Q4
Q1
19
5. Selling and administrative expenses, all paid in cash, are $100,000 per quarter.
20 S frame unit purchases
50,000
55.000
6. Dividend payments are $50,000 per quarter.
21 S manufacturing cost per unit
$7
$7
22 L frame unit purchases
40.000
45,000
7. The beginning cash balance for Q1 of 20X1 is $95,000.
23 L manufacturing cost per unit
$10
$10
24
Prepare the following for each of the four quarters of 20x1:
25
80% of current quarter's purchases paid in the current quarter
1. Sales budget
26
20% of previous quarter's purchases paid in the current quarter
2. Cash receipts budget
27
3. Cash disbursements budget
28 Other expenses
29 Selling and admin. expenses
100,000 per quarter
30 Payment of dividends
50,000
per quarter
31
32 Prepare the following:
33
1 Sales budget
34
2 Cash receipts budget
35
3 Cash disbursements budget
36
4 Summary cash budget

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